Phoenix Property Sells Tokyo Apartment Building for JPY 20B

Hong Kong-based Phoenix Property Investors has sold an apartment building in Tokyo for JPY 20 billion ($180 million), just 30 months after buying the property in the Shinagawa area.

The private equity shop headed by financiers Benjamin Lee and Samuel Chu announced that it had sold the Oakwood Residence Shinagawa to a Korean institutional investor on behalf of its Phoenix Asia Real Estate Investments V fund, with the transaction completed on 27 December.

A local Korean industry source told Mingtiandi that Seoul-based asset manager Korean Investment Management had raised funds to acquire a Tokyo serviced apartment with that acquisition being reported has having been completed on the same date as the Oakwood disposal.

“With our partnership with Oakwood, a globally recognized serviced apartment operator, and our expertise in asset management, we successfully increased the asset’s value by upgrading the building, and the income of the building has been significantly increased,” a Phoenix spokesperson told Mingtiandi.

Repositioning a Rental Apartment Block

After converting the sixteen-year-old property from rental residences into a 202-room serviced apartment facility, at the reported prices Phoenix would have sold the 18,847 square metre (202,867 square foot) property for the equivalent of JPY 1.06 million per square metre.

Located within a cluster of office blocks in Tokyo’s Shinagawa business district that house the corporate headquarters of Canon, Microsoft Japan, and Philips Electronics Japan, the serviced apartment has been operated by LA-based Oakwood since opening in its new format in 2018.

Studio rooms at the Oakwood Residence Shinagawa, which is within six hundred metres of the Shinagawa station transportation hub and ten minutes from Tokyo’s city centre, are currently available at $3,720 for the minimum 30 day rental period. Singapore’s Mapletree Investments bought out Oakwood in 2017 for an undisclosed sum.

Upgrade, Sell, Repeat

The sale is the latest disposal from the Phoenix Asia Real Estate Investments V opportunistic fund, which closed on $750 million in 2013, after receiving commitments from global institutional investors including the University of Michigan and the UK’s City of Wolverhampton Council.

The under-three-year enhancement and disposal of the asset is in line with the approach that Phoenix has employed previously to harvest returns on projects in its home base of Hong Kong and other cities in the region.

Just under three years ago, the private equity firm sold a Wanchai district project that it had been developing through a 50-50 joint venture with Hong Kong-listed developer CSI Properties.

After finishing demolition and obtaining permits to develop a 5,798 square foot commercial project on the plot, the joint venture sold the site to Hong Kong-listed conglomerate Continental Holdings for HK$1.18 billion ($150 million).

Six months before that transaction, Phoenix sold Kwun Tong View, an office building in Kowloon’s Kai Tak area, for HK$1.99 billion after redeveloping a former industrial site at 410 Kwun Tong Road.

Putting $1.2B Fund to Work

The successful flip of the Tokyo serviced apartments comes three months after the private equity firm joined the $1 billion fund club when its latest opportunistic fund closed at $1.15 billion.

Phoenix Asia Real Estate Investment VI – the private equity company’s sixth pan-Asian investment vehicle is now in its deployment phase, targetting opportunities primarily in the residential, office and retail sectors across cities in Hong Kong, China, Japan and Taiwan.

By November, the firm said the fund had committed to 17 investments, totalling approximately $424 million.

Targetting Japanese Residential

Phoenix is one of a number of real estate fund managers that have gotten involved in transactions in Japan’s residential sector in recent months.

Just under a month ago, M&G Real Estate acquired 12 residential properties in Tokyo, Osaka, Kyoto, and Fukuoka, bringing M&G Real Estate’s Japanese exposure across its Asia Pacific core portfolio to 22 percent, according to Richard van den Berg, the manager of M&G’s Asian property strategy.

That acquisition came just over two months after European insurance titan Allianz entered Japan’s housing market by,acquiring a portfolio of 82 rental apartment properties from Blackstone for €1.1 billion ($1.2 billion).